5 Best Profitable Stocks to Buy in December

Profitability analysis is generally used to determine the ability of a company for generating ample revenues to meet all its business-related expenses and still manage to offer satisfactory returns to its investors. This analysis helps to determine a profitable company over a loss-making one.

The best accounting tool to understand a company’s profitability position is ratio analysis. Generally, there are four key profitability ratios — gross income ratio, operating income ratio, pre-tax profit margin and net income ratio. Here, we have used the most effective and frequently used profitability ratio – net income ratio.

Net Income Ratio

Net income ratio gives us the exact profit level of a company. It reflects the percentage of net income to total sales revenues. Using net income ratio, one can determine a company’s capability to bear all its operating and non-operating expenses from its sales revenues. A higher net income ratio usually implies a company’s ability to generate ample sales revenues and successfully manage all its business functions.

Screening Parameters

Net income ratio is not the only indicator of future winners. So, we have added a few more criteria to arrive at a winning strategy.

% Rating Strong Buy greater than 70%: This indicates that 70% of the analysts covering these stocks are optimistic.

These few parameters narrowed down the universe of over 7,860 stocks to only 11.

Here are five of the 11 stocks that qualified the screen:

Align Technology, Inc. ALGN is a designer of computer-aided design and computer-aided manufacturing digital services. It has an average four-quarterpositive earnings surprise of 16.6%.

SORL Auto Parts, Inc. SORL is a developer, manufacturer and distributor of automotive brake systems. It has an average four-quarterpositive earnings surprise of more than 100%.

Nova Measuring Instruments Ltd. NVMI is a designer, developer and seller of process control systems. It has an average four-quarterpositive earnings surprise of 19.3%.

WageWorks, Inc. WAGE is a management services provider. It has an average four-quarterpositive earnings surprise of 7.3%.

Tactile Systems Technology, Inc. TCMD is a medical technology company. It has an average four-quarterpositive earnings surprise of more than 100%.

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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